In the years following the onset of the take-or-pay crisis, the force majeure defense came to symbolize the largely unsuccessful efforts of pipelines to keep to a minimum the adverse economic consequences associated with traditional long-term gas purchase contracts. It seems safe to say that many producers viewed the invocation of force majeure as a thinly veiled effort to abrogate contracts. To a large extent the courts agreed.' Recent events, however, suggest that the force majeure defense is on the rebound and, more importantly, is being viewed favorably by the courts when premised on the impact of Order 380 or Order 436 (see &so Schrader's article in Natural Gar, September 1988).
Force Majeure-the New Wave
A series of recent decisions appears to suggest that early reports of the demise of force majeure may have been premature. These are fundamentally different from earlier force majeure decisions in that the pipelines point to specific regulatory acts, Federal Energy Regulatory Commission mRC) Orders 380 and 436, and assert that the orders in and of themselves render the pipelines unable to perform under their gas purchase contracts.
Specifically, a factor that was relatively insignificant in the first wave of take-or-pay litigation has developed into a pivotal issue. Gas-on-gas competition has resulted in a significant erosion of core markers-pipelines find that long-standing customers are lookiirg to new, less-expensive sources of supply. This in turn results in take-or-pay exposure if the pipelines are unable to achieve corresponding reductions in take-or-pay quantities under their gas purchase conh-acts.
The new gas-on-gas competition did not develop in a vacuum. Two regulatory developments injected an element of competition never before experienced by the industry. Order 380 voided minimum commodity bills _____ John C. Herbert ir apartner in the New Orleans h w j i n n of Simon, Peragine, Smith & Redfcorn.